About 500 of Kendall Square’s most recent residents are in professional limbo.
Their company, Baxalta, is soon to be acquired. And the buyer, Irish drug maker Shire, hasn’t committed to keeping Baxalta’s employees.
That’s put them in an all too familiar conundrum in biotech: What to do while merger talks drag on when you don’t know if you’ll have a job next year. Or even this summer. And neither does your boss.
“There are times when you’re trying to retain the best people, but you’re not able to tell them for sure that their job is safe,” said Dr. Deborah Dunsire, who managed a similar situation as CEO of Cambridge’s Millennium Pharmaceuticals when Takeda acquired it in 2008.
All bosses can do is be as at honest as possible, said Dunsire, who now leads Waltham’s Forum Pharmaceuticals.
Employees, meanwhile, have to carry on as though business is proceeding as usual, even if they’re combing job boards and updating their resumes all the while.
And Baxalta’s staff faces an added wrinkle: Shire’s takeover was a hostile one, and those don’t usually engender a lot of faith among the rank and file of the companies being bought.
“It’s not as though it feels like you’re being welcomed with open arms,” said Tim Van Biesen, an industry strategist who heads Bain & Company’s health care division. “There’s a great deal of volatility” before mergers close, “and sometimes people will run for the hills.”
Executives from Shire and Baxalta declined interview requests, and both companies said they’ll have more details to share once the integration process is underway.
Things weren’t always so up in the air at Baxalta. The drug company began its life just last summer as a spinout of the global giant Baxter, debuting with grand plans to become the world’s leading maker of treatments for hemophilia. Management even rang the opening bell of the New York Stock Exchange.
In December, Baxalta cut the ribbon on an opulent space in Kendall Square, bringing in about 250 workers from its Illinois headquarters and hiring another 250 or so to fill out its ranks. The idea, head scientist Dr. John Orloff said at the time, was to cozy up to Kendall’s many innovators and build a presence in the growing field of oncology.
But just a few weeks later, Baxalta management finally ceded to Shire’s months of hostile overtures and formally accepted a $32 billion offer to forgo independence. Federal regulators are poring over the terms now, and both companies expect a final sign-off in June, clearing the way for a merger.
For employees at Baxalta’s Cambridge complex, that spells uncertainty. Shire has said the combined company will save $500 million in the first three years of its existence — which means it will part with $500 million of salaries, benefits, and building leases.
Just where that savings will come from remains undecided, but it will necessarily mean some people will lose their jobs.
In February, Shire CEO Dr. Flemming Ornskov told the Boston Globe that Baxalta’s Kendall outpost is “a very attractive location” and a “cornerstone” of the company’s research operation. But no final decision on whether to keep it — or keep it intact — has been made, and Shire representatives have steered clear of making any commitments until the deal is sealed.
After all, the feds could still pull the rug out from under the merger, as they did to Pfizer and Allergan earlier this year, and that would leave Baxalta right where it started.
That risk keeps Baxalta and Shire from baring all to one another. If Baxalta divulged the details of its business only to see the deal blow up, it would unwittingly be exposing trade secrets to a competitor.
So, for now, Shire and Baxalta are operating as standalone companies, and their employees are tasked with putting out of mind the very real possibility that a combined one will have no place for them.
It’s a lot to ask, and there’s evidence that the ensuing anxiety can impact productivity.
In a 2011 article in the journal Nature Reviews Drug Discovery, former Pfizer research chief John LaMattina noted a marked slowdown in R&D progress following mergers. For one, LaMattina wrote, new management must examine every program to determine its worth, which pushes pause on many processes. And panicky researchers often use what would be lab time to freshen up their CVs.
Outside of science, Baxalta’s Kendall-based business development scouts may find their jobs more difficult for a different reason. Just as the company cannot guarantee what the future holds for its employees, it can’t promise would-be partners what it will look like in a year.
Similarly, Baxalta Ventures, the firm’s in-house investment arm, may struggle to convince upstart companies to let it buy in.
“If you were founding a company and you had venture investors that were obviously moving into a major transition, I would have pause,” said Greg Verdine, a serial biotech entrepreneur and chemistry professor at Harvard University. “Wouldn’t you?”
But, as industry veterans can attest, this is all part of the game in biopharma. More than 250 drug companies changed hands last year, according to analysis firm Evaluate Pharma, and a decline in biotech share prices has some analysts predicting another supermarket sweep in 2016.
Biotech executive Ron Renaud went through the same process in 2014 when Merck acquired his Idenix Pharmaceuticals, leaving him to field those unanswerable questions from his staff beneath the cloud of a pending merger. But the industry moves on, he said, and people tend to land on their feet once the ink dries.
“When you sign up for this quick-moving ecosystem in both pharma and biotech, you’re also signing up for a very high potential for your geography to change on an unannounced basis — and maybe on a frequent basis,” said Renaud, who now runs Cambridge’s RaNA Therapeutics.
And, completing the circle, Shire employees can empathize.
Less than two years ago, their company accepted a $54 billion offer from the drug maker AbbVie that foisted workers into the same state of limbo. When that deal later collapsed, due to ever-shifting US Treasury rules, Ornskov emerged triumphant, shouting “We’re back!” at an all-hands meeting over the blaring synths of Kylie Minogue.
It seems unlikely that Baxalta CEO Ludwig Hantson will get the same opportunity. But then, anything’s possible in biotech.
Kendall Squared brings you dispatches from the world’s epicenter for biotechnology and drug discovery.
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